Buying lawn accounts?

I am working on a deal with another LCO in my town to purchase his business. He has 50 lawns that bring in about $62,000 per season before clean-ups which he estimates to be another 10 to 12 thousand. He has suggested that he would like to get one seasons worth of just mowing income for the business. That makes his asking price $60,000 and would include a very used truck an Exmark with 1000 hours a Bobcat with 1200 hours a decent trailer and little more. I have been basing my decision on that asking price.

Then after exploring this site for a while I found a thread that suggested that the common rate for such a deal not including equipment should be about 2 months worth of mowing income. I could really use some feedback on this to help me make an offer. Thanks.

What happens if you purchase this business for 60,000 and his current customers want to use someone else besides yourself?
How can you guarantee that you will retain all those customers that make up that 60,000?

I agree with the above advice. There is no guarantee that his current accounts would remain with you after buying the business. If he has them contracted for a minimum of one month of service then I would offer the equilivent of one month of sevice fees plus the value of the equipment. I would also ask for a non-compete agreement with him. Otherwise he could go and buy new equipment and take all of the accounts away from you if his current customers prefer him over you. He would be very hard pressed to find someone willing to give him the equivilent of one year of gross receipts for the business. JMO.

Geejay,
We've purchased accounts before and things CAN work out fine if gone about properly. Email me about more specifics at LBMD1@yahoo.com and I'll go over it in more detail. Basically, find out his weekly gross, multiply it by 6 weeks and that would be a very equitable arrangement for both parties. Factor the equipment seperately at fair market value and make an offer only if the equipment is worth it. When transferring accounts, you must get the seller to work with you for a few weeks, easing the worries of the customers you are purchasing. Having him say to his customers something like he is pursuing other interests and has found someone with similar a background and experience\morals like himself to TAKE OVER his business. Most customers do not realize he is getting money this way and will resent you less because they don't feel like a commodity being bought and sold without their input. If you need any help email me. Where in RI are you located and where is the business located that is being sold? I lived and worked in Newport about 10 years ago and my kids live in Westerly and am down in that area every other week.

I have no concerns about his starting back mowing as he is about 65 and just wants out of the business. We are not in an area where yearly contracts are a common use. He has had his client base for nearly 35 years. We both are perfectionist when it comes to the quality of our work and have a similar personality so I see it being a smooth transition for the customers. The length of time he has had these accounts is a big selling point to him but I see it in a sort of different way. I have accounts that have been with me for several years that I know I will never lose but there are some things you can't control. People don't live forever or stay in the same house forever. 35 years is a long time and brings the chance for change in on my watch. Thank you all for your input, opinion helps.

I was involved in a deal where the buyer paid 20% of previous year gross. Equipment would be priced accordingly and a noncompete was signed. As mentioned above the Buyer worked the accounts for 2 month and sellar did billing for these and recieved his price. After two months the sellar actually wrote a check to the buyer, because two months worked exceeded purchase price. The benefit here is that the sellar is still involved and will help ensure the customers stay with you because he wants paid.

I bought out a friend. Paid $3,500 for $24,000 dollars a season worth of business. Out of 25+ accounts, I lost one of them. Only to have the guy come back 4 weeks later because his new guy was a scrub and scorched his lawn. I also charged him $10 a week more than I would have if he would have stayed in the first place. I have since picked up 8 new accounts from the good words of these customers.
The main thing that I did was talk to almost all of the customers before making the deal. I also had a (no compete) clause with the old LCO. Things worked out great. I made that money back fast.
You do good work and good things tend to happen. I will never regret this decision.